Flexible System and Method for Electronic Trading

ABSTRACT

System, method, and program products offer flexibility to the rather rigid way of trading in an electronic trading system. Orders for a tradeable object may typically get matched according to set terms and/or conditions at an electronic exchange. A trader may log onto the electronic exchange to trade the tradeable object, and may choose to display and trade the tradeable object according to a different set of terms and/or conditions. As such, the market data sent to the trader from the exchange is converted to a format according to the trader&#39;s selection, so that it may be presented to the trader in this format. Transaction messages sent to the exchange from the trader are converted to the format readable by the matching process, so that it can process the messages. Other features and advantages are described herein.

CROSS REFERENCE TO RELATED APPLICATIONS

The present application is a continuation of U.S. patent applicationSer. No. 11/178,523, filed on Jul. 11, 2005. The 11/178,523 applicationclaims priority to U.S. Provisional Patent Application No. 60/619,620,filed on Oct. 18, 2004. The contents of each of the above-disclosedapplications are incorporated herein by reference in their entirety.

TECHNICAL FIELD

The present invention relates generally to data processing systems foruse in electronic trading and, more particularly, the present inventionis directed to a flexible system and method for electronic trading.

BACKGROUND

An electronic trading system includes a host exchange that has a centralcomputer in which bids and offers are received and executed, if a matchexists between them. The host exchange provides a summary of the bidsand offers for viewing by those traders that have access to the tradingsystem. At their trading stations, the traders can monitor their screensand freely enter bids or offers, which are communicated to the hostexchange.

To communicate with the central computer at the host exchange, certainmessage protocols are defined and employed. For instance, at a lowlevel, the message protocol includes definitions for the message header,payload, and trailer. Beyond that, there are certain defined processesutilized to open a connection with the host exchange, retrieve marketdata, add an order, change an order, delete an order, close theconnection, and so on. The message protocols can be as simple or complexas the electronic exchange deems necessary to offer its tradeableobjects for trade. Whatever the defined message protocol, the messagingbetween the central computer and the trading terminal must follow theprotocol, or else, the communication will likely fail.

Once logged onto the host exchange, the trader can choose from a varietyof tradeable objects to trade. As used herein, the term “tradeableobject,” refers simply to anything that can be traded with a quantityand/or price. It includes, but is not limited to, all types of tradeableevents, goods, and financial products. For instance, stocks, options,bonds, futures, currency, and warrants, as well as funds, derivativesand collections of the foregoing, and all types of commodities, such asgrains, energy, and metals may be considered tradeable objects. Atradeable object may be “real,” such as products that are listed by anexchange for trading, or “synthetic,” such as a combination of realproducts that is created by the user. A tradeable object could actuallybe a combination of other tradeable object, such as a class of tradeableobjects.

When a trading session begins, the trading station receives the marketinformation in a data feed being distributed from the central computerat the electronic exchange. The trading station has software thatcollects information from this data feed and displays it to the trader.For instance, the data feed may include a message that contains priceand quantity information, which represents orders in the market. Thesoftware can strip the price and quantity information from the messageand display it to the trader. From this display, a trader may view theinformation and make decisions on whether to enter an order, modify anorder, or perform some other trading related operation. Sometimes thedecisions regarding a trader's particular trading strategy are performedby a computer itself given initial instruction by the trader. When anaction is taken, the trading station generates a message according tothe defined message protocol, populates the various fields in themessage, and sends it to the central computer at the electronicexchange. Then, the central computer will receive the message and takethe appropriate action.

Each tradeable object is traded according to a particular set of termsor conditions, which are often set forth by the electronic exchange. Forinstance, a tradeable object might have a certain contract size and/ortrading unit. The central computer is programmed to match orders basedon those predefined terms and conditions. Additionally, the informationcontent in the data feed provided by the central computer also conformsto the predefined terms and conditions. Traders receive this information(in the format set by the exchange) and take action, whether it iswatching the market, entering orders, managing orders, and so on. Whilethis generally rigid way of trading may work for some types of trading,it is desirable to offer a system and method that adds flexibility tothe rather rigid way of trading in an electronic trading system.

BRIEF DESCRIPTION OF THE DRAWINGS

Many aspects of the present embodiments may be better understood withreference to the following drawings. The components in the drawings arenot necessarily to scale, emphasis instead being placed uponillustrating example embodiments:

FIG. 1 illustrates an example trading system for electronic tradingaccording to an example embodiment, wherein the trading system includesa trading station where a trader can submit bids and offers for atradeable object being traded at an electronic exchange;

FIG. 2 illustrates another example trading system for electronic tradingaccording to another example embodiment, wherein the trading systemincludes a trading station where a trader can submit bids and offers fora tradeable object being traded at more than one electronic exchange;

FIG. 3 illustrates a data flow diagram that demonstrates an example flowof information between the elements shown in FIGS. 1 and 2 for enablingsimplified trading;

FIG. 4 illustrates a screen shot for showing an example display ofmarket information at a trading station of either embodiment shown inFIGS. 1 and 2, the presentation of the market information is based onterms and/or conditions set forth by an electronic exchange; and

FIG. 5 illustrates a screen shot for showing an example display of thesame market information presented in FIG. 4 at the trading station,except the presentation of the market information is based on a formatchosen by the trader, such that the market information has units of atype different than what the electronic exchange provided in FIG. 4.

DETAILED DESCRIPTION I. Overview

At the heart of an electronic trading system lays an automated matchingprocess. Bids and offers are received, validated, and queued in pricesequence and within price by time of entry, although other matchingvariations exist. There are many benefits of having an automatedmatching process, such that it allows for a more efficient marketplacethan traditional ways of trading. To take advantage of the benefits ofelectronic trading, some markets, like the energy market, have opened uptrading to all sorts of market participants. For some tradeable objectswithin the energy market, like power, deregulation has also played apart in giving access to those beyond the actual producer anddistributor of power to speculators and other types of professionaltraders.

In trading generally, the price changes of a tradeable object arereactions to news or some other source. Thus, it becomes important thatthe speed of the price changes be made available to everyoneparticipating. The rapid spread of new price information is performed bythe electronic trading system in which all bids and offers are madeavailable to the participants. Upon viewing the price information, themarket participants may react by entering bids, offers, or other kindsof transaction messages. Regardless of whether the trader must reactinstantly to the new price information or there is a lot of informationto review before an action is taken, it is generally desirable to havethe tools in place to assist the trader in assimilating the informationthat is presented.

As indicated earlier, a tradeable object is traded according to aparticular set of terms or conditions. Given the nature of a particulartradeable object or how it has been traded in the past, the given termsor conditions may be more relevant to one group of market participantsrather than another group of market participants. While this may be truefor many different classes of tradeable objects, it may be particularlyseen in the energy markets. For instance, a producer of power (forexample, a power plant) and a distributor of power (for example, a powercompany) may talk about the buying and selling of power in mega-watthours (MWhrs) for particular time periods, whereas, a professionaltrader may be used to buying and selling tradeable objects in astandardized unit, such as contracts. Yet, electronic exchanges that nowoffer these tradeable objects to a broad spectrum of market participants(for example, not just the producer or distributor) offer them in theirstandard adopted units (for example, MWhrs/day in the example of power).For these types of tradeable objects, the standard adopted units are notalways the easiest to view and/or use by some traders. Despite tradershaving computer systems that can analyze the information according toits standard adopted units, it may be more desirable to present theinformation in a different way.

The embodiments, such as described herein, provide increased flexibilityto the trader by offering the trader the ability to trade a tradeableobject in a format that is preferred by the trader, rather than in aformat that is based on the rigid set of terms and/or conditionsprovided by an exchange. As such, it allows the trader, among otherthings, to view the market information, make trades, and analyze marketdata according to the trader's preferred format.

In particular, the embodiments operate with an electronic exchange thatprocesses price information and/or order information according to unitsof a first type, and the embodiments operate to convert that informationinto more preferred units of a second type. Preferably, the tradeableobject that has units of a second type is chosen such that theinformation is more easily viewable and/or useable by the trader.Further, the embodiments allow the trader to seamlessly trade accordingto the preferred units of the second type even though it is notsupported by the central computer at the electronic exchange. Using thepower example above, if an electronic exchange offers power for trade inunits of MWhrs/day, a trader, at the trading station, may buy or sellthe tradeable object in units of contracts rather than in MWhrs/day; thesystem will then convert the transaction messages from contracts intoMWhrs/day so that the central computer can process the messages.

Additionally, the conversion into preferred units now enables theinformation to be presented in a way that is easily understood bytraders who are used to trading according to a particular unit (forexample, traders may be used to trading in units widely adopted by otherexchanges, rather than in some other unit provided by a specific centralcomputer.) Furthermore, the trader can trade all of his or her tradeableobjects, whether some tradeable objects necessitate conversion or not,in the same consistent units, thereby making certain types of strategieseasier to perform and/or monitor. For instance, if a trader wants tospread trade power, which is given in MWhrs/day, and another tradeableobject, which is given in another unit, with the use of the exampleembodiments, the trader can view and effectively trade both power andthe other tradeable object in the same units (for example, incontracts). The trader may also compute other items of interest, such asprofit and loss or position, based upon a conversion.

The example embodiments are particularly useful at the client side (forexample, the trader's network side). At the client side, the embodimentscan add flexibility to central computers that abide by a particular setof terms and conditions. Then, if a trader wants to trade the tradeableobject according to a different way than what is allowed by the centralcomputer, he or she can do so using the embodiments described herein.The example embodiments may also be useful at the exchange side. At theexchange side, the embodiments can add flexibility in the way centralcomputers process messages, so as not to be limited by one set of termsand conditions.

Other systems, methods, and advantages of the present embodiments willbe or become apparent to one with skill in the art upon examination ofthe following drawings and description. It is intended that all suchadditional systems, methods, features, and advantages be within thescope of the present invention, and be protected by the accompanyingclaims.

II. A First Example Trading System

FIG. 1 illustrates an example electronic trading system in which theexample embodiments may be employed. In this example, the systemcomprises a trading station 102 that accesses an electronic exchange 104through a gateway 106. Router 108 is used to route messages between thegateway 106 and the electronic exchange 104. The electronic exchange 104is where buy and sell orders sent from the trading station 102 arematched by a computer process (e.g., the central computer) with ordersfrom other trading stations (not shown). The electronic exchange 104 maylist one or more tradeable objects for trade. While not shown in thefigure for the sake of clarity, the trading system may include otherdevices that are specific to the client site like middleware andsecurity measures like firewalls, hubs, security managers, and so on, asunderstood by a person skilled in the art.

The computer employed as the trading station 102 generally can rangefrom a hand-held device, laptop, or personal computer to a largercomputer such as a workstation and multiprocessor. An illustrativepersonal computer uses Pentium™ microprocessors and operates under aWindows 2000™, Windows NT™, or Windows XP™ operating system with 3Com's3CR990-TX-97 network card. Generally, the trading station 102 includes amonitor (or any other output device) and an input device, such as akeyboard and/or a two or three-button mouse to support click basedtrading, if so desired. One skilled in the art of computer systems willunderstand that the present embodiment is not limited to a particularclass or model of computer employed for the trading station 102 and willbe able to select an appropriate system.

The computer employed as the gateway 108 generally can range from apersonal computer to a larger computer. An illustrative gateway 108computer uses Pentium™ microprocessors and operates under a Windows2000™ or Windows NT™ (server or workstation) operating system with3Com's 3CR990SRV97 network card. Generally, the gateway 108 mayadditionally include a monitor (or any other output device), inputdevice, and access to a database, if so desired. One skilled in the artof computer systems will also understand that the present embodiment isnot limited to particular class or model of computer(s) employed for thegateway 108 and will be able to select an appropriate system.

It should be noted that a computer system that may be employed here as atrading station or a gateway generally includes a central processingunit, a memory (a primary and/or secondary memory unit), an inputinterface for receiving data from a communications network, an inputinterface for receiving input signals from one or more input devices(for example, a keyboard, mouse, etc.), and an output interface forcommunications with an output device (for example, a monitor). A systembus or an equivalent system may provide communications between thesevarious elements.

It should also be noted that the trading station 102 generally executesapplication programs resident at the trading station 102 under thecontrol of the operating system of the trading station 102. Also, thegateway 108 executes application programs resident at the gateway 108under the control of the operating system of the gateway 108. In otherembodiments and as understood by a person skilled in the art, thefunction of the application programs at the trading station 102 may beperformed by the gateway 108, and likewise, the function of theapplication programs at the gateway 108 may be performed by the tradingstation 102.

The actual electronic trading system configurations are numerous, and aperson skilled in the art of electronic trading systems would be able toconstruct a suitable network configuration. For the purposes ofillustration, some example configurations are provided to illustratewhere the elements may be physically located and how they might beconnected to form an electronic trading system; these illustrations aremeant to be helpful to the reader and they are not meant to be limiting.According to one example illustration, the gateway device may be locatedat the client site along with the trading station, which is usuallyremote from the matching process at the electronic exchange. Accordingto this instance, the trading station, the gateway, and the router maycommunicate over a local area network, and the router may communicatewith the matching process at the electronic exchange over a T1, T3,ISDN, or some other high speed connection.

In another example illustration, the client site may be located on theactual grounds of the electronic exchange (for example, in the buildingof the exchange). According to this instance, the trading station, thegateway, and the router may still communicate over a local area network,but the router may communicate with the matching process at theelectronic exchange through another connection means besides a T1, T3,or ISDN.

In yet another example illustration, the gateway may be housed at, ornear, its corresponding electronic exchange. According to this instance,the trading station may communicate with the gateway over a wide areanetwork or through the use of a T1, T3, ISDN, or some other high speedconnection.

In another example illustration, the gateway may be located remote fromthe trading station and remote from the electronic exchange, which mightbe particularly useful in systems that include interconnection ofmultiple trading networks. Thus, one trading network might have gatewayaccess to an electronic exchange. Then, other trading networks maycommunicate with the trading network that has gateway access through aT1, T3, ISDN, or some other high speed connection.

III. A Second Example Trading System

FIG. 2 illustrates another example trading system that uses similarcomputer elements as shown in FIG. 1, in which, the example embodimentsmay be employed to trade at multiple electronic exchanges. The systemcomprises a trading station 202 that can access multiple electronicexchanges 204 and 208. In this particular embodiment, electronicexchange 204 is accessed through gateway 206 and electronic exchange 208is accessed through another gateway 210. Alternatively, a single gatewaymay be programmed to handle more than one electronic exchange. Router212 is used to route messages between the gateways 206 and 210 and theelectronic exchanges 204 and 208. While not shown in the figure, thesystem may include other devices that are specific to the client sitelike middleware and security measures like firewalls, hubs, securitymanagers, and so on, as understood by a person skilled in the art.Additional electronic exchanges may be added to the system so that thetrader can trade at any number of exchanges, if so desired.

The trading system presented in FIG. 2 provides the trader with theopportunity to trade tradeable objects listed at different electronicexchanges. To some traders, there can be many advantages with amulti-exchange environment. For example, a trader could view marketinformation from each tradeable object through one common visualdisplay. As such, price and quantity information from the two separateexchanges may be presented together so that the trader can view bothmarkets simultaneously in the same window. In another example, a tradercan spread trade different tradeable objects listed at the differentelectronic exchanges.

As indicated earlier, one skilled in the art of electronic tradingsystems will understand that the present embodiments are not limited tothe particular configurations illustrated and described with respect toFIG. 1 and FIG. 2, and will be able to design a particular system basedon the specific requirements (for example, by adding additionalexchanges, gateways, trading stations, routers, or other computersserving various functions like message handling and security).Additionally, several networks, like either of the networks shown inFIG. 1 or FIG. 2, may be linked together to communicatively access oneor more electronic exchanges.

IV. Flow Diagram

FIG. 3 is a flow diagram illustrating an example operation of eithersystem of FIG. 1 or FIG. 2. This flow diagram provides an example of theflow of data by which a user communicates with the electronic exchange,receives market information for a selected tradeable object, and tradesthe tradeable object. Based on these examples, a person skilled in theart will understand how other sequences of operations can be performed.

As indicated by FIG. 3, the gateway 300 includes various components:price server 302, fill server 304, order server 306, and anauthentication system that is used to authenticate the user and/ortrading station 310. While the functionality of each of these gatewaycomponents may be distributed elsewhere in the trading system, a singlecomputer, such as shown at the gateway 300 in the figure, may executeseveral programs at once (for example, a computer that employs amultiprocessing operating system).

According to an example embodiment, a trader opens an application on thetrading station 310, which allows the trader to subscribe to one or moretradeable objects that are listed at the electronic exchange 308.Subscription information from the trading station 310 is passed to theprice server 302 at the gateway 300, which then subscribes to thecorresponding market data for each selected tradeable object at theelectronic exchange 308. Market data may include any informationassociated with the tradeable object, including the best bid price, thebest ask price, the last traded price, other prices outside of the bestbid price and ask price, quantities at those given prices, closingprice, and settlement price. The actual contents of the market data mayoften depend on the actual electronic exchange or the tradeable object,itself. In response to the subscription request, the electronic exchange308 communicates the appropriate market data to the gateway 300 wherethe price server 302 receives and processes the information.

A trader may trade a tradeable object listed with another electronicexchange (not shown in FIG. 3) by subscribing to that exchange in asimilar fashion as it did with respect to the electronic exchange 308,in the example given directly above. Then, subscription information ispassed to the price server associated with the second electronicexchange, which in turn subscribes to the market data for the tradeableobject(s). The preferred trading system allows the trader to accessmultiple exchanges through a single application on the trading station310. Alternatively, however, a separate application may run for eachelectronic exchange or tradeable object.

According to an example embodiment, the market data provided by theelectronic exchange 308 is given in units of a first type. As indicatedearlier, a central computer at an electronic exchange may be programmedto match orders based on predefined terms and conditions. The units ofthe first type are associated with these predefined terms andconditions. For instance, the market data from the central computer mayinclude price data that has units in dollars, ticks, or some otherderivative of price. In another instance, the market data from thecentral computer may include quantity data that has units in contracts,lots, flow, or some other unit.

To illustrate a particular example, some tradeable objects have units in“flow.” Examples of tradeable objects that trade in flow are energyrelated tradeable objects. The Intercontinental Exchange or ICE is oneexample of an electronic exchange that provides energy related tradeableobjects. Oil, natural gas, and electric power are examples of tradeableobjects currently traded at ICE and are examples of flow tradeableobjects. Oil may be traded in barrels per day (“bbl/day”), gas may betraded in million British Thermal Units per day (“MMBtus/day”), andelectric power may be traded in Megawatt-hours per day (“MWhrs/day”).

The actual deliverable quantity of tradeable objects that specifydelivery in flow can vary. For instance, a power tradeable object thatspecifies the delivery of a given amount of electricity per peak day forthe entire delivery month will have different deliverable quantities forFebruary (for example, “28” days) than for December (for example, “31”days). A contract represents the entire delivery amount, a lotrepresents the number of delivery periods in a contract, and flowrepresents the amount to be delivered in each delivery period. So, forinstance, the ICE US PJM Power Jan '05 contract specifies “21” deliveryperiods, weekdays only, of 800 MWhrs per day. Therefore, “1”contract=“21” lots×“800” MWhrs/day (flow)=“16,800” MWhrs. Because thenumber of weekdays change in January depending on the year, the ICE USPJM Power Jan '06 contract would specify “22” delivery periods; so, “1”contract=“22” lots×“800” MWhrs/day (flow)=“17,600” MWhrs.

According to the example embodiment, attributes are used to define eachtradeable object. Attributes may be utilized by the gateway 300 todetermine the units in which a particular tradeable object is executedby the automated matching process. Preferably, the market data from theelectronic exchange 308 conveys the attributes to the gateway 300 and/ortrading station 310.

Attributes may be given as a tradeable object type, tradeable object ID,contract ID, initial margin, tick value, delivery unit, number ofblocks, and multiplier. Delivery unit refers to the increment quantityof the tradeable object, also referred to as the minimum delivery (forexample, “1000” barrels for oil, “2500” MMBtus for natural gas, “50”MWhrs for power, and so on, may all be minimum delivery units), numberof blocks refers to the number of deliverable units in a contract (forexample, there may be “31” deliverable units in a January contract, “28”deliverable units in a February contract, and so on, for power; whereasthere may be “365” delivery units for a natural gas contract), andmultiplier refers to the number of cycles per period, where a period isthe duration of the delivery date (for example, per quarterly, per monthdelivery, per day delivery, and so on). The attributes may be stored atthe trading station 104 and/or the gateway 106, and updated as needed.

To determine whether the market data received from the electronicexchange 308 has units of the first type, the price server 300 maydetermine the market data has units of flow if the following examplerelationship is true:

$\begin{matrix}{\frac{\begin{pmatrix}{{Minimum}{\mspace{11mu} \;}{Quantity} \times} \\{{Increment}\mspace{14mu} {Quantity}}\end{pmatrix}}{{Unit}\mspace{14mu} {Quantity}} \geq 1} & \left( {{Equation}\mspace{14mu} 1} \right)\end{matrix}$

Where minimum quantity and unit quantity are values given by theexchange and relate to tick sizes, and increment quantity refers to theminimum delivery. If the relationship is not true, then the market datahas units of contracts. It is understood that there are other ways todetermine whether the market data is in flow, such as use of a flag bitor a series of bits in the data feed to identify the unit type. Ofcourse, the present invention is not limited to flow/contract-typetradeable objects, so it is noted that any equation and/or mechanismsmay be used here to determine the unit type, if it is necessary to doso. If the unit type of the market data is already known, and a testlike this is not necessary, then this step may be skipped.

If it is determined that market data received from the electronicexchange 308 has units of a first type, then the price server 300 canconvert the data into market data in units of a second type, if soprogrammed. Any predefined relationship may be used to perform theconversion (this relationship depends the units of the first type andwhat the trader prefers as his or her unit type). In other words, theprice server 300 receives the market data (in a message format), detectswhich values require conversion by scanning the message contents, looksup the appropriate conversion relationship and attributes, and convertsthose values that require conversion according to the relationship. Oncethe conversion is complete, the price server 300 can communicate theconverted market data to the trading station 310. Here are some examplesfor converting flow tradeable objects to contracts:

Equation 2, shown directly below, may be used to convert the portions ofmarket data given in flow quantity into market data given in contracts.Thus, the price server 300 preferably converts the flow based quantityinto contracts using the relationship:

$\begin{matrix}{{Contracts} = \frac{{Flow}\mspace{14mu} {Quantity}}{{Delivery}\mspace{14mu} {Unit}}} & \left( {{Equation}\mspace{14mu} 2} \right)\end{matrix}$

In an example using Equation 2, Henry Hub Financial Gas (“Henry Hub”)trades in flow per day and a delivery unit is equal to “2,500” MMBtu.Using Equation 1, the price server 300 can convert a flow quantity of“7,500” MMBtus/day to “3” contracts:

${3\mspace{14mu} {Contracts}} = \frac{7,500}{2,500}$

So, for example, let's assume that the electronic exchange 308 sends amessage containing market data that indicates an offer of “7,500”MMBtus/day at a particular price to the price server 302. The priceserver 302 preferably recognizes that the quantity was given in flow(according to this example, it is in MMBtus/day) and performs theconversion on that piece of information to the desired units (e.g.,contracts). Then, the price server 302 sends a message containing marketdata that indicates a bid of “3” contracts at the particular price tothe trading station 310. The price server 302 could substitute the data(e.g., insert a “3” in place of “7,500”) in the message, oralternatively, the price server 302 could generate a new message withthe new data. This process may continuously repeat itself as the gatewayreceives new market data.

It is understood that the price server may have to aggregate orderquantity according to price levels. The price server may do this inthose instances where the electronic exchange provides information onorders independent from one another. While displaying ordersindependently may have advantages in some instances, it may be desirableto view aggregated quantity. FIGS. 4 and 5, which are described later,show aggregated order quantities.

It is also understood that the process of conversion may instead occurat the trading station 310. As such, the trading station would receivethe market data in units of a first type and similarly convert themarket data to have units of a second type. Alternatively, theelectronic exchange, itself, may perform the conversion so that thosetraders, who wish to view the market data in units of the second type,may receive a market data feed in units of the second type. Theelectronic exchange may also receive transaction messages from tradersbased on several types of terms and conditions and perform a conversionto standardized them for matching.

The order server 306 sets up a communication link with the electronicexchange 308 so that when a trader submits an order, the order server306 can forward the order to the electronic exchange 308. Upon receiptof the order, the electronic exchange 308 preferably sends an orderconfirmation back to the order server 306. This order confirmation isforwarded on to the trading station 310 as a response.

When a trader is viewing the market data after it has been converted bythe price server 302 to have units of the second type, the trader maypreferably enter orders based on the units of the second type. Then,when an order is received by the order server 306, the order server 306will preferably convert the order message having units of second type tounits of the first type before forwarding the order message to theelectronic exchange 308. Equation 3 is a relationship that may be usedto convert contracts to flow quantity.

Flow Quantity=Contracts×Delivery Unit  (Equation 3)

For instance, let's assume that the trader is viewing Henry Hub incontract form on the trading screen. The trader decides to submit anorder to buy “12” contracts at a particular price. In response to thetrader's action, the trading station 310 will generate and send an ordermessage with the order parameters to buy “12” contracts at the specifiedprice to the order server 306. The order server 306 will preferablyconvert the “12” contracts to a flow quantity of “30,000” MMBtus/day(“12” contracts×“2,500” MMBtus/day/contract=“30,000” MMBtus/day) andmodify the order message to buy “30,000” at the specified price beforesending the order message to the electronic exchange 308. If the traderis viewing Henry Hub in flow on the trading screen, then it is notnecessary to perform this conversion process assuming that the orderquantity is in units of flow.

The order server 306 may perform the conversion on any order messagebefore it forwards the order message to the electronic exchange 308. Inother words, the order server 306 is programmed to ensure that anytransaction message is not routed to the electronic exchange in thewrong format. For instance, if the trader decides to delete part of aworking order, then the order server 306 can make the propermodifications to the delete order message so that the correct quantityis deleted at the electronic exchange. If the trader decides to move theorder to a different price, then the order server 306 will ensure theright order is re-priced along with the correct quantity.

The order server 306 may be programmed to accept any order type. Someexamples of order types include limit orders, order-cancel-order (“OCO”)orders, reserve quantity orders, and time in force restrictive orders. Alimit order refers to an order message where the buy or sell quantityand price are specified, but the order can be executed at the givenprice or better. An OCO order is an outright limit order that is linkedto another order, where a fill in one order cancels the other linkedorder. A reserve quantity order refers to a limit order that has alarger hidden quantity bucket as a reserve to float subsequent orders tothe market in specific clip sizes; this order defines a “show quantity”and “total quantity.” Once the show quantity is filled, an order equalto the show quantity will be automatically floated by the system untilthe total quantity has been filled. Time in force restrictive ordersinclude good till day (“GTD”), where orders are cancelled at the end ofa trading session or put on HOLD, good till time (“GTT”), where ordersare put on hold after the specified time, good after logout (“GAL”),which creates a persistent order feature that keeps active orders in themarket even if the trader has logged out of the system or losesconnection to the electronic exchange 308.

The fill server 304 can provide historical order fills to the tradingstation. When the electronic exchange 308 matches an order of the userof the trading station 310, the electronic exchange 308 sends a fillorder to the order server 306. The order server 306 can send a fillresponse to the trading station indicating the order, or part of theorder, has just been filled. The fill response from the order server 306can be used to, among other things, update the display of the graphicalinterface (such as shown in FIGS. 4 and 5) and initiate a log in anaudit trail window. The order server 306 may also send the fill responseto the fill server 304, which delivers fill data in units of the secondtype to the trading station 310 to be recorded and/or displayed in afill window. The fill server 304 may also be used in failover as itmaintains a historical record of the fills.

V. Example Display of Market Data

In the embodiment of FIG. 3, the trading station 104 receives the marketinformation in converted form from the gateway 106. In other words, theprice server 108 converts the market information based on units of afirst type received from the electronic exchange 102 to marketinformation based on units of a second type. The market informationbased on units of the second type is then broadcast over the network tothe trading station 104 where it can be received and eventuallydisplayed in the preferred units (units of the second type). Accordingto one embodiment, the trader may choose to display the marketinformation according to the first type, in which case, the tradingstation 104 will re-convert the market information back to have unitsbased on the first type, or the trader may display the marketinformation based on units of the second type.

In an alternative embodiment, the price server 108 at the gateway 106does not perform the conversion. Instead, the price server 108broadcasts the data based on units of the first type over the network tothe trading station 104 where it can be received and then displayed intraditional form. In this alternative, if the trader chooses to displaythe market information in a different form, then the trading station 104will preferably convert the market information into market informationbased on the preferred units. Otherwise, the trading station may displaythe market information as it comes from the exchange without goingthrough this conversion process.

In yet another alternative embodiment, the electronic exchange may offervarious data feeds that comprise data based on several different units.In this embodiment, the trader can choose which data feed (e.g., basedon the trader's preferred units) to receive and process. To illustrate,an electronic exchange might provide two data feeds, one data feedcontains the information based on flow and a second data feed containsthe information based on contracts. From that, the trader can choose themost preferred data feed.

FIG. 4 is a screen shot illustrating a graphical interface fordisplaying market information associated with a flow tradeable object.For this particular example, the flow tradeable object is the Henry HubNatural Gas contract (“Henry Hub”), although market informationassociated with any tradeable object, flow based or otherwise, may bepresented. The standard pricing format for the Henry Hub is in dollarsand cents per MMBtu to flow on a daily basis. The user interfaceillustrated in FIG. 4 allows a trader to view trends in the orders forthe Henry Hub according to the standard format. While the particulartype of graphical interface shown in FIG. 4 provides the trader with anintuitive view of the market, the present invention is not so limited.As such, any graphical interface may be utilized.

An option is provided on the graphical interface at 400 to choosebetween displaying the market information as flow (an example of unitsof a first type) or in contracts (an example of units of a second type).The option is shown as an icon that can be dragged between “flow” and“contract.” When the icon is positioned over “flow,” the marketinformation is displayed according to the flow format. When the icon ispositioned over the “contract,” the market information is displayedaccording to contract format. Preferably, the option is made availableto the user so that a quick selection can be made to change between theunit values, if so desired. The embodiments are not limited to themechanism (shown at 314) utilized to switch between flow and contract,but rather one skilled in the art will recognize the many mechanisms forallowing a user to select between displaying the market informationaccording to units of a first type or according to units of a secondtype. It is also noted that the words “flow” and “contract” are used inthis example and are shown in FIG. 4 at 314 for illustrative purposes,however, it is understood that if the units were different than “flow”or “contract,” then preferably a different representation—one thatidentifies those units—are displayed. Additionally, it is understoodthat the embodiments are not limited to flow or contracts, and that anyunit of a first type or a second type may be used.

Turning to the graphical interface shown in FIG. 4, a value axis 402 isdisplayed and includes values representing price or some otherderivative of price, like yield. While the values are displayed along avertically oriented axis, the values may be displayed along ahorizontally oriented axis or along an axis positioned at some otherangle. Once the value axis 402 is generated, flow quantity and priceinformation contained in the market data feed is received and used topopulate the display against the value axis 402. As new flow quantityand price information arrives from the electronic exchange via thegateway, the trading screen is preferably updated to reflect any marketchanges.

Bid flow quantity indicators 404 and ask flow quantity indicators 406are placed in the locations that correspond to their respective value orprice levels along the value axis 402. Indicators that represent bidquantities are displayed at locations in the “Bid” column and indicatorsthat represent ask quantities are displayed at locations in the “Ask”column. By looking at the trading screen in FIG. 4, the trader canquickly locate the inside market, which refers to the highest bid priceand the lowest ask price, and is “5.014” and “5.016,” respectively.Further, the trader can view how much flow quantity—for example, bid andask flow quantity—is available at various price levels. Currently, thereis shown a bid flow quantity of “7500 MMBtus” at a price of “5.014,” andthere is shown an ask flow quantity of “32500 MMBtus” at a price of“5.016.” Other levels of market depth are also shown, which include abid flow quantity of “50,000 MMBtus” at a price of “5.013” to a bid flowquantity of “25,000 MMBtus” at a price of “5.011,” and an ask flowquantity of “12,500 MMBtus” at a price of “5.017” to an ask flowquantity of “7,500” at a price of “5.020.” The last traded flow quantitywas “2500 MMBtus” at a price of “5.014” shown at 408.

As the market conditions change, the indicators 404 and 406 candynamically move relative to the value axis 402. Thus, the trader canquickly tell, among many other things, if the market has moved up ordown in value. A trading screen similar to that shown in FIG. 4 iscommercially available as MD Trader™ in the X_TRADER® product offered byTrading Technologies International, Inc. of Chicago, Ill. Further,various aspects of the trading screen in FIG. 4, including the dynamicmovement of the bid and offer indicators against an axis, are describedin U.S. Pat. No. 6,772,132. Adjustable viewing of the axes, includingthe consolidation of price levels and quantities, is described in U.S.patent application Ser. No. 09/971,087, filed on Oct. 5, 2001, andentitled, “Click Based Trading with Intuitive Grid Display of MarketDepth and Price Consolidation.” A variety of trading tools that can beused with the trading screen to assist in visualizing the market arefurther described in U.S. patent application Ser. No. 10/125,894, filedon Apr. 19, 2002, and entitled, “Trading Tools for Electronic Trading.The entire content of each of the above-referenced applications isincorporated herein by reference.

The intuitiveness of the particular trading screen shown in the figureresults from the dynamic display of aggregated flow quantities,collectively shown as bid flow quantity indicators 404 and ask flowquantity indicators 406, against the values along the value axis 402.Locations in alignment to the values along the value axis 402 are, inessence, fixed in relation to the value or price levels (for example,locations 410 are statically fixed to the price of “5.024”); so that asthe inside market (or just “market”) climbs or drops in value, the usercan quickly view this change. If the market starts to go out of view,the market can be re-positioned along the value axis 402, in which, thelocations will become fixed in relation to a new set of price levels.Re-positioning of the market information may occur automatically ormanually. It is also noted that the columns, such as the bid, ask, orprice columns may be rearranged. For instance, the value axis 402 can bemoved in between the bid column and the ask column.

To enter an order using the graphical interface, a trader can preset aquantity at 412, which in this case the preset quantity is set to“2500,” and with a user input device, select a cell in the “Bid” or“Ask” columns associated with the desired price of the order. Forinstance, if the cell associated with the price of “5.012” is selectedin the “Bid” column, then an order to buy “2,500 MMBtus” at a price of“5.012” would be automatically sent to the electronic exchange. Aworking order icon 414 would be displayed (and an icon is displayed inthe figure to represent a working order at this price) in the workingorder column, “Wrk Ord,” indicating that a flow quantity of “2,500MMBtus” has been sent and entered in the exchange order book. Similarly,if the cell associated with the price of “5.016” is selected in the“Ask” column, then an order to sell “7,500 MMBtus” at a price of “5.016”would be sent to the electronic exchange (an order has not been sent andtherefore a working order indicator is not displayed.) Orders may besent at other price levels too. The trading screen allows for fast orderentry, but any kind of order entry system may be used to submit buy andsell orders to the electronic exchange.

According to one embodiment, a mouse input device is used to position acursor over a cell and upon selection of the mouse button (either uponthe down stroke of the mouse button or upon release of the button,however programmed), an order is sent to the electronic exchange. Anorder is a buy or sell order depending on whether the cursor is in thebid display region or the ask display region. In another embodiment,buttons on an input device are programmed so that when a particularbutton is pressed it sends a buy order to the matching engine and thatwhen another button when pressed it sends a sell order to the matchingengine.

In yet another example embodiment, a keyboard may have keys that areassociated with the price levels displayed on the graphical interface.Initiating an order includes sending an order to a host exchange (forexample, see the electronic exchange 104 in FIG. 1) or equivalently,leaving the “hands of the trader.” For instance, the client device, anetwork device, or the host exchange may be programmed to verify certainparameters of the order and later reject it based on the parameters andsome other criteria. Then, although the trader initiated the order, thesoftware might still reject it and not send it to the host exchange.Software of this kind might be put into place as a risk management tool,for example.

FIG. 5 is a screen shot illustrating a graphical interface fordisplaying the market information first shown in FIG. 4, but now incontract form. According to this embodiment, through the option toselect what units to display at 402, the user has chosen to display themarket information in “contract” form. Presenting the market informationin contract form has its many advantages including, among other things,that it is easier to read the smaller-in-magnitude numbers, it isgenerally easier to perform quick mental calculations on theinformation, requires less screen space because the numbers aresmaller-in-magnitude. Additionally, the trader can view his or hertradeable objects in the same terms (for example, “contracts” in thisexample), regardless of the tradeable object or the electronic exchange.

The trader can still quickly locate the inside market, which is still at“5.014” and “5.016,” respectively. Now, the trader can view how manycontracts are available at various price levels. Currently, there isshown a bid quantity of “3” available at a price of “5.014,” (equal to abid flow quantity of “7500 MMBtus”) and there is shown an ask quantityof “13” available at a price of “5.016,” (equal to an ask flow quantityof “32500 MMBtus”). Other levels of market depth are also shown, whichinclude a bid quantity of “20” at a price of “5.013” to a bid quantityof “10” at a price of “5.011,” and an ask flow quantity of “5” at aprice of “5.017” to an ask quantity of “3” at a price of “5.020.” Thelast traded quantity is shown as “1” at a price of “5.014,” which isshown at 500.

VI. Risk and P&L Calculations

Risk checking and profit and loss (“P&L”) calculations for energytradeable objects will preferably use “lots” instead of “contracts.”“Lots” represent the risk exposure per contract by taking into accountflow, number of blocks, and a multiplier. Lots can vary for differentmonths with the same tradeable object. For example, a January contractfor Henry Hub has “31” lots, whereas the February contract has “28”lots. As such, it is preferable to use lots rather than contracts inthese calculations.

VII. Conclusion

A system, method, and program products are provided to allow a trader totrade a tradeable object according to units he or she is mostcomfortable, even though the electronic exchange provides the marketinformation in units of a different type. While the example embodimentsmay be employed for all kinds of tradeable objects, they areparticularly useful in trading certain energy tradeable objects.

Although the example programs, processes, methods and system has beendescribed and illustrated in detail, it is clearly understood that thesame is by way of illustration and example only and is not to be takenby way of limitation. Since numerous modifications and changes willreadily occur to those skilled in the art, it is not desired to limitthe invention to the exact construction and operation shown anddescribed, and accordingly, all suitable modifications and equivalentsmay be resorted to, falling within the scope of the invention.

According to one embodiment, the example system takes the form of acomputer program product that is stored on a computer readable storagemedium and is executed by a suitable instruction execution system in thecomputer-based device. The term computer readable medium, as usedherein, refers to any medium that participates in providing instructionsto processor for execution. Such a medium may take many forms, includingbut not limited to, non-volatile media, volatile media, and transmissionmedia. Non-volatile media includes, for example, optical or magneticdisks, such as storage device. Volatile media includes dynamic memory,such as main memory or RAM (random access memory). Common forms ofcomputer-readable media include, for example, a floppy disk, a flexibledisk, hard disk, magnetic tape, or any other magnetic medium, a CD-ROM,any other optical medium, punch cards, paper tape, any other physicalmedium with patterns of holes, a RAM, a PROM, and EPROM, a FLASH-EPROM,and any other memory chip or cartridge, or any other medium from which acomputer can read.

According to an alternative embodiment, a hardware embodiment might takea variety of different forms. A hardware embodiment may be implementedas an integrated circuit with custom gate arrays or an applicationspecific integrated circuit (“ASIC”). A hardware embodiment may also beimplemented with discrete hardware components and circuitry. Inparticular, it is understood that the logic structures and method stepsdescribed in the flow diagrams may be implemented in dedicated hardwaresuch as an ASIC, or as program instructions carried out by amicroprocessor or other computing device.

1-20. (canceled)
 21. A computer readable medium having stored thereininstructions executable by a processor to perform a method including:receiving by a computing device electronic market data from acomputerized matching process, the electronic market data associatedwith a tradeable object and including quantity information that isbased, in part, on a flow based unit; converting by the computing devicethe quantity information that is based on the flow based unit toconverted quantity information that is based on a contract based unit;displaying by a trading station the converted quantity information in ascreen region of a graphical user interface, the graphical userinterface being coupled to a microprocessor; receiving by the tradingstation a command through a user input device to initiate placement of atrade order to buy or sell the tradeable object, the trade order havingan order quantity parameter that is based on the contract based unit;converting by the computing device the order quantity parameter that isbased on the contract based unit to a converted order quantity parameterthat is based on the flow based unit; and sending by the computingdevice the trade order to the computerized matching process, wherein thetrade order includes the converted order quantity parameter.
 22. Thecomputer readable medium of claim 21, wherein a predefined relationshipis used to convert the quantity information that is based on the flowbased unit to the converted quantity information that is based on thecontract based unit.
 23. The computer readable medium of claim 21,wherein the flow based unit is associated with a set of terms andconditions utilized by the computerized matching process.
 24. Thecomputer readable medium of claim 21, wherein the contract based unit isassociated with a set of terms and conditions preferred by a trader. 25.The computer readable medium of claim 21, wherein the tradeable objectincludes any of the following products: oil, natural gas, or electricpower.
 26. The computer readable medium of claim 21, wherein displayingthe converted quantity information on the graphical user interfaceincludes dynamically displaying bid quantities and ask quantities thatare based on the contract based unit.
 27. The computer readable mediumof claim 21, further including instructions for: receiving newelectronic market data from the computerized matching process, the newelectronic market data associated with the tradeable object andincluding new quantity information that is based, in part, on the flowbased unit; converting the new quantity information that is based on theflow based unit to new converted quantity information that is based onthe contract based unit; and updating the screen region of the graphicaluser interface with the new converted quantity information.
 28. Thecomputer readable medium of claim 21, wherein the computing device isthe trading station.
 29. The computer readable medium of claim 21,wherein the computing device is a gateway.
 30. The computer readablemedium of claim 21, wherein the flow based unit includes any of thefollowing units: bbl/day, MMBtus/day, MMBtus, MWhrs/day, or MWhrs.
 31. Asystem for electronic trading including: a computing device adapted toreceive electronic market data from a computerized matching process, theelectronic market data associated with a tradeable object and includingquantity information that is based, in part, on a flow based unit,wherein the computing device is adapted to convert the quantityinformation that is based on the flow based unit to converted quantityinformation that is based on a contract based unit; and a tradingstation adapted to display the converted quantity information in ascreen region of a graphical user interface, the graphical userinterface being coupled to a microprocessor, wherein the trading stationis adapted to receive a command through a user input device to initiateplacement of a trade order to buy or sell the tradeable object, thetrade order having an order quantity parameter that is based on thecontract based unit; wherein the computing device is adapted to convertthe order quantity parameter that is based on the contract based unit toa converted order quantity parameter that is based on the flow basedunit, and wherein the computing device is adapted to send trade order tothe computerized matching process, wherein the trade order includes theconverted order quantity parameter.
 32. The system of claim 31, whereina predefined relationship is used to convert the quantity informationthat is based on the flow based unit to the converted quantityinformation that is based on the contract based unit.
 33. The system ofclaim 31, wherein the flow based unit is associated with a set of termsand conditions utilized by the computerized matching process.
 34. Thesystem of claim 31, wherein the contract based unit is associated with aset of terms and conditions preferred by a trader.
 35. The system ofclaim 31, wherein the tradeable object includes any of the followingproducts: oil, natural gas, or electric power.
 36. The system of claim31, wherein displaying the converted quantity information on thegraphical user interface includes dynamically displaying bid quantitiesand ask quantities that are based on the contract based unit.
 37. Thesystem of claim 31, wherein the computing device is further adapted toreceive new electronic market data from the computerized matchingprocess, the new electronic market data associated with the tradeableobject and including new quantity information that is based, in part, onthe flow based unit, wherein the computing device is further adapted toconvert the new quantity information that is based on the flow basedunit to new converted quantity information that is based on the contractbased unit, and wherein the trading station is further adapted to updatethe screen region of the graphical user interface with the new convertedquantity information.
 38. The system of claim 31, wherein the computingdevice is the trading station.
 39. The system of claim 31, wherein thecomputing device is a gateway.
 40. The system of claim 31, wherein theflow based unit includes any of the following units: bbl/day,MMBtus/day, MMBtus, MWhrs/day, or MWhrs.